Transaction recording problem with Q6 R4

Posted by curmudgeon on September 11, 2006, 7:52 pm

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I am running Quicken 6 R4 and have recently run into a problem in
recording the distribution from a mutual fund account into a savings
account.

The event was entered as a sale with the proceeds going to the savings
account. However since taxes were withheld from the proceeds, I edited
the savings account to show a split transaction with negative amounts
entered for the taxes (similar to a payroll transaction). The net
proceeds are then deposited. I have done this in the past with no
apparent problems.

If I then review the transaction ledger for the mutual fund account,
it has been changed to reflect a large negative Commission amount and
erroneous investment amount.

Can anyone shed any light as to what is happening and what to do about
it??

Posted by R. C. White on September 12, 2006, 11:37 am

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Hi, Archie.

> recording the distribution from a mutual fund account

> The event was entered as a sale

I'm not sure that I understand what happened here. Was it a sale? Or was
the fund paying you a dividend in cash? Or was it distributing cash that
you already had in the account - from some prior dividend or sale that had
not yet been reinvested, perhaps?

Remember the two-step process:

Step 1: Understand what really happened.

Step 2: Record that in Quicken.

Trying to do Step 2 before Step 1 is a recipe for confusion - or worse.

And until WE understand what happened, our advice might not be very helpful.

My best guess is that you had the fund sell some of your shares and send you
the proceeds. But that doesn't explain why taxes were withheld. How much
tax, and how was that amount computed? Federal income tax, or some other
tax?

My best guess - again - is that you need to record TWO transactions. The
first would be for the sale of your shares, resulting in a cash balance in
your fund Account. This entry would be a split transaction, with your gain
(or loss) on the sale going to your Capital Gain Income Category; Quicken's
Sale - Shares Sold transaction should handle this automatically.

The second entry would be for distribution of the cash to your savings
account. This also would be a split transaction, but the income tax
withheld would not be an expense of any kind. It would be a Transfer to
another of your Asset Accounts. The name of this other account doesn't
matter, but it is could be whichever account you use to hold taxes withheld
from your wages. It probably makes sense - and easier reconciliation with
Forms W-2 and 1099 at yearend - to create a new Asset Account for taxes
withheld from such distributions. I'm running Q2007 Basic now and the only
"withdrawal" transaction offered in the drop-down Enter transaction box is
Withdraw, under Cash Transactions. You'll have to enter it as a Split
transaction, showing transfers to your Savings Account and to your prepaid
taxes (by whatever name) Account.

When all the dust has settled, you should have the proper numbers in your
gain and loss category, and in your Fund Account, and in your Savings
Account - and in your prepaid taxes (by whatever name) Account. And NO
commission.

Please post back and let us know if my guesses are wrong. Also, remember
that I've been retired for over a decade and tax rules change daily, so be
sure to check with your own CPA to see if my advice fits your situation.

RC
--
R. C. White, CPA
San Marcos, TX
(Retired. No longer licensed to practice public accounting.)
rc@grandecom.net
Microsoft Windows MVP

>I am running Quicken 6 R4 and have recently run into a problem in

> recording the distribution from a mutual fund account into a savings

> account.

> The event was entered as a sale with the proceeds going to the savings

> account. However since taxes were withheld from the proceeds, I edited

> the savings account to show a split transaction with negative amounts

> entered for the taxes (similar to a payroll transaction). The net

> proceeds are then deposited. I have done this in the past with no

> apparent problems.

> If I then review the transaction ledger for the mutual fund account,

> it has been changed to reflect a large negative Commission amount and

> erroneous investment amount.

> Can anyone shed any light as to what is happening and what to do about

> it??

Posted by curmudgeon on September 12, 2006, 4:09 pm

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wrote:

>Hi, Archie.

>> recording the distribution from a mutual fund account

>> The event was entered as a sale

>I'm not sure that I understand what happened here. Was it a sale? Or was

>the fund paying you a dividend in cash? Or was it distributing cash that

>you already had in the account - from some prior dividend or sale that had

>not yet been reinvested, perhaps?

This was cash from a sale initiated by an IRA MRD requirement.

>Remember the two-step process:

>Step 1: Understand what really happened.

>Step 2: Record that in Quicken.

>Trying to do Step 2 before Step 1 is a recipe for confusion - or worse.

>And until WE understand what happened, our advice might not be very helpful.

>My best guess is that you had the fund sell some of your shares and send you

>the proceeds. But that doesn't explain why taxes were withheld. How much

>tax, and how was that amount computed? Federal income tax, or some other

>tax?

The fund sold the shares to meet the MRD requirement with the proceeds
(after withholding Federal and State taxes) being deposited into my
savings account.

>My best guess - again - is that you need to record TWO transactions. The

>first would be for the sale of your shares, resulting in a cash balance in

>your fund Account. This entry would be a split transaction, with your gain

>(or loss) on the sale going to your Capital Gain Income Category; Quicken's

>Sale - Shares Sold transaction should handle this automatically.

Being an IRA account, no capital gains involved.

>The second entry would be for distribution of the cash to your savings

>account. This also would be a split transaction, but the income tax

>withheld would not be an expense of any kind. It would be a Transfer to

>another of your Asset Accounts. The name of this other account doesn't

>matter, but it is could be whichever account you use to hold taxes withheld

>from your wages. It probably makes sense - and easier reconciliation with

>Forms W-2 and 1099 at yearend - to create a new Asset Account for taxes

>withheld from such distributions. I'm running Q2007 Basic now and the only

>"withdrawal" transaction offered in the drop-down Enter transaction box is

>Withdraw, under Cash Transactions. You'll have to enter it as a Split

>transaction, showing transfers to your Savings Account and to your prepaid

>taxes (by whatever name) Account.

Why would this be any different than my pension direct deposit as a
split transaction with the gross amount showing a positive amount in
the split and the various deductions showing as negative amounts and
allocated to the appropriate categories with the net amount being
deposited?

>When all the dust has settled, you should have the proper numbers in your

>gain and loss category, and in your Fund Account, and in your Savings

>Account - and in your prepaid taxes (by whatever name) Account. And NO

>commission.

>Please post back and let us know if my guesses are wrong. Also, remember

>that I've been retired for over a decade and tax rules change daily, so be

>sure to check with your own CPA to see if my advice fits your situation.

>RC

I don't see this as a tax issue but most likely a pilot error. Does my
attempt to clarify the transaction give any clue as to what might
happening?

Archie

Posted by R. C. White on September 13, 2006, 7:45 am

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Hi, Archie.

> Being an IRA account, no capital gains involved.

> I don't see this as a tax issue but most likely a pilot error.

Agreed. My first "best guess" would have been different if the IRA had been
mentioned originally.

But the basic idea remains the same, except that the "capital gain" will go
to a non-taxable category. And the second entry I suggested (for the actual
withdrawal, split into two transfers - to savings and to prepaid taxes -
would still apply.

Much of this confusion is because Quicken (and most taxpayers) ignore the
fact that an IRA creates a separate legal entity: the custodial account
that holds the IRA's investments. In theory, the IRA assets should be
excluded entirely from your own Quicken file. Thus, purchases and sales,
including gains and losses, would not be recorded in your personal file at
all. Only the withdrawal received from that outside party (the IRA
custodian) would be recorded in your personal Quicken file. The IRA
custodian (or trustee) would have a separate set of books (Quicken or
otherwise). In this separate set of books, the custodian would first record
the sale (and gain) and then would record the disbursement to you of the
MRD, less withholding. Of course, the custodian would also have to handle
remittance of the withheld taxes to the IRS and the state tax agency.

As I said, I've long been retired and haven't had to deal with IRA
transactions for a long time - and never in Quicken. So I'll back off and
let Dan Brown or some other experienced user provide any further help -
which I will read as an interested observer.

RC
--
R. C. White, CPA
San Marcos, TX
(Retired. No longer licensed to practice public accounting.)
rc@grandecom.net
Microsoft Windows MVP

> wrote:

>>Hi, Archie.

>>> recording the distribution from a mutual fund account

>>> The event was entered as a sale

>>I'm not sure that I understand what happened here. Was it a sale? Or was

>>the fund paying you a dividend in cash? Or was it distributing cash that

>>you already had in the account - from some prior dividend or sale that had

>>not yet been reinvested, perhaps?

> This was cash from a sale initiated by an IRA MRD requirement.

>>Remember the two-step process:

>>Step 1: Understand what really happened.

>>Step 2: Record that in Quicken.

>>Trying to do Step 2 before Step 1 is a recipe for confusion - or worse.

>>And until WE understand what happened, our advice might not be very

>>helpful.

>>My best guess is that you had the fund sell some of your shares and send

>>you

>>the proceeds. But that doesn't explain why taxes were withheld. How much

>>tax, and how was that amount computed? Federal income tax, or some other

>>tax?

> The fund sold the shares to meet the MRD requirement with the proceeds

> (after withholding Federal and State taxes) being deposited into my

> savings account.

>>My best guess - again - is that you need to record TWO transactions. The

>>first would be for the sale of your shares, resulting in a cash balance in

>>your fund Account. This entry would be a split transaction, with your

>>gain

>>(or loss) on the sale going to your Capital Gain Income Category;

>>Quicken's

>>Sale - Shares Sold transaction should handle this automatically.

> Being an IRA account, no capital gains involved.

>>The second entry would be for distribution of the cash to your savings

>>account. This also would be a split transaction, but the income tax

>>withheld would not be an expense of any kind. It would be a Transfer to

>>another of your Asset Accounts. The name of this other account doesn't

>>matter, but it is could be whichever account you use to hold taxes

>>withheld

>>from your wages. It probably makes sense - and easier reconciliation with

>>Forms W-2 and 1099 at yearend - to create a new Asset Account for taxes

>>withheld from such distributions. I'm running Q2007 Basic now and the

>>only

>>"withdrawal" transaction offered in the drop-down Enter transaction box is

>>Withdraw, under Cash Transactions. You'll have to enter it as a Split

>>transaction, showing transfers to your Savings Account and to your prepaid

>>taxes (by whatever name) Account.

> Why would this be any different than my pension direct deposit as a

> split transaction with the gross amount showing a positive amount in

> the split and the various deductions showing as negative amounts and

> allocated to the appropriate categories with the net amount being

> deposited?

>>When all the dust has settled, you should have the proper numbers in your

>>gain and loss category, and in your Fund Account, and in your Savings

>>Account - and in your prepaid taxes (by whatever name) Account. And NO

>>commission.

>>Please post back and let us know if my guesses are wrong. Also, remember

>>that I've been retired for over a decade and tax rules change daily, so be

>>sure to check with your own CPA to see if my advice fits your situation.

>>RC

> I don't see this as a tax issue but most likely a pilot error. Does my

> attempt to clarify the transaction give any clue as to what might

> happening?

> Archie

Posted by danbrown on September 12, 2006, 1:51 pm

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curmudgeon wrote:

> Can anyone shed any light as to what is happening and what to do about

> it??

IF I'm understanding this right, the following should work.

Go to your Savings account and create a deposit for $800 (this should
be the actual amount deposited ... I'm making up an example). Split
the deposit transaction. On the 1st line, enter the name of your m/f
account and the amount of $1000 (the total value of m/f sold) and on
the 2nd line (which will already show -$200) the name of your "Taxes
Withheld" account. Record this transaction.

Go to your m/f account and record the sale of m/f (total value $1000)
which will offset the $1000 entry you created in the prior step.
Record this transaction.

db